There Is a 30 Percent Probability That a Particular Stock

question 81

Multiple Choice

There is a 30 percent probability that a particular stock will earn a 17 percent return and a 70 percent probability that it will earn 11 percent.What is the risk-free rate if the risk premium on the stock is 8.60 percent?

• A)4.20 percent
• B)4.80 percent
• C)5.20 percent
• D)5.40 percent
• E)5.80 percent

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Definitions:

1941

A significant year marked by events such as the attack on Pearl Harbor, which led the United States into World War II.

Four Freedoms

Fundamental principles outlined by President Franklin D. Roosevelt in 1941, which include freedom of speech, freedom of worship, freedom from want, and freedom from fear.

Truman's Decision

Refers to President Harry S. Truman's decision to use atomic bombs on Hiroshima and Nagasaki in 1945, effectively ending World War II.

Atomic Bombs

Powerful nuclear weapons that release enormous energy through nuclear reactions, historically used during World War II on the Japanese cities of Hiroshima and Nagasaki.